Markets May Fall 25% in Next 2 Years: Chief Investor

Stocks gained on Monday, but Daniel Niles, co-CIO of Alpha One Capital Partners, warned investors that there might be some market headwinds ahead.

“The market is headed for a pretty big fall coming up between here and year-end,” Niles told CNBC Monday. “Businesses are slowing down and the bond market is telling you that it’s worried about deflation or slowdown—The stock market seems more than happy to ignore it, like it did in the summer of 2007.”

Niles said he “wouldn’t be surprised” to see a 20 to 25 percent correction in the next two years.

“I’m trying to see [companies that will] benefit from the slowdown—names that benefit as companies shut down retail operations and move to the Internet,” he said. “So search names such as Google starts to get more interesting.”

Niles’ stock picks also include Apple and Power One .

Meanwhile, Niles said he wouldn’t invest in Hewlett-Packard following the resignation of the CEO and added that he sees a downturn in the cyclicals.

“Dell and IBM are the most likely beneficiaries from this,” noted Niles. “[But] IBM missed their services bookings number by several billions of dollars, so they were seeing some issues before this."

"Do you want to be caught in a cyclical set of companies if you’re going into a cyclical slowdown?”